Publication: Healthcare Financial Management
Date published:
Language: English
PMID: 17804
ISSN: 07350732
Journal code: HFM

Case management was introduced in the 1980s as an approach for controlling costs by improving quality and ensuring the appropriate use of hospital resources at the bedside. Because of cutbacks and other changes in staffing, however, case management since the 1990s has involved little more than utilization review and discharge planning.

There is renewed interest in case management today, as hospital executives are beginning to recognize its unique role as a bridge between the clinical and the financial sides of healthcare delivery. An interdisciplinary case management team works directly with physicians to ensure that admissions and continued stays in the hospital are justified, that documentation supports the appropriate level of care and payment for the hospital, that internal and external roadblocks to timely discharge are removed, and that the coordination of care across the continuum improves quality, patient satisfaction, and the outcomes of care. The case management team also works directly with the finance department to streamline the revenue cycle, improve communication with payers, institute operational efficiencies, and, in the process, free up resources for investment.

Reducing LOS

Case managers are working alongside physicians and other caregivers to help eliminate the obstacles that add cost and inefficiency without improving the quality and safety of health care. At 225-bed Sherman Hospital, Elgin, III., a team of case managers operates in each unit to make sure every patient is carefully monitored throughout the hospital stay. Case managers present cases that involve inadequate documentation, insufficient justification for continued hospital stay, or questions regarding insurance coverage of planned treatments to the physician head of the program, Ronald Hirsch, MD.

Over the past eight to nine months, Providence Hospitals, Columbia, S.C., have transformed their case management program from a siloed operation to a more inclusive, interactive, and collaborative process under the direction of the chief nursing officer and the vice president of medical affairs and involving key department heads. An interdisciplinary team of clinicians and case managers meets daily to identify problems that are delaying the transition to the next level of care, increasing the cost of treatment, or potentially undermining the quality of care.

Case management programs such as these are facilitating the progression of the plan of care so patients are discharged in accordance with planned discharge dates and discharge requirements and are ready for posthospital care. Through the collaboration of physicians and nurses, case management identifies the contributing causes of discharge delays and resolves them in real time or gathers information on trends that can be targeted in performance-improvement initiatives.

As a result, case management is driving down hospital length of stay (LOS). Since December 2010, for example, Providence Hospitals have trimmed LOS from 5.3 days to 4.7 days. Other similar case management programs are achieving cost savings through reduced LOS. A collaborative, interdisciplinary case management program at a 600-bed not-for-profit hospital in the Midwest decreased its proportion of extended LOS cases from 8 to 1 percent. A case-managementdriven decrease in LOS from 6.5 days to 5.2 days resulted in $6 million of additional revenue and almost $2 million in cost savings for a large, not-for-profit, multihospital system.

Improving Payment

As the case management medical director for Sherman Hospital, Hirsch reviews with physicians cases that may not meet insurers' requirements for treatment in the acute care setting, including orders for imaging tests that are not directly related to the reason for admission or continued stay. Case managers under his direction serve an educational function as they explain to physicians that the hospital does not receive any additional payment for such tests and that providing the test on an inpatient basis deprives the outpatient department of revenue. Case managers also arrange for testing that has been shifted to the outpatient setting and follow up with patients and families to make sure it is done.

Case managers protect against losses of revenue when a patient's admission status is inaccurate. Observation rates have been increasing in many healthcare facilities, even though observation services are paid at lower rates than inpatient admissions. By determining the appropriate admission status for patients, one hospital lowered its observation rate from 14 percent to 10 percent.

Payment also can be lost because of incomplete documentation by physicians. Payers may challenge payment for surgical cases if physicians have neglected to provide evidence of a previous trial of conservative therapy. Payment also may not be in keeping with Medicare-severity-adjusted diagnosis-related groups (MS-DRGs) if documentation fails to appropriately reflect patients' severity of illness.

Careful review of physician documentation to maximize payment is a mainstay of case management. In one hospital, a case-management-directed on-site concurrent documentation review process improved documentation of the severity of illness of patients and increased the Medicare case mix index from 1.84 to 2.07 in a matter of months.

Improving the Revenue Cycle

Providence Hospitals' case management program makes case managers part of the revenue cycle process to ensure that bills are not delayed because of improper coding or documentation and to help overturn denied claims during the appeals process. The hospitals' case managers shorten the time needed to respond to payers about denials. Where it once took 30 to 45 days to determine whether a denial should be submitted for secondary review and revenue recovery, it now takes less than a week, according to David Stewart, CFO. In addition to an accelerated denials review process, case management also reduces the amount lost through denied claims. Denied payments decreased by nearly $1 million since October 2010.

To prevent future denials, case managers at Providence Hospitals counsel members of the patient financial services team about the types of information needed to satisfy payers' requirements for payment. Case managers also become involved in managed care contracting to be sure that payments will not be denied because language in the contract creates unrealistic time frames for communicating with payers about patient status and plans for care or other requirements.

Increasing Elficiency

In a recent initiative, Providence Hospitals focused not only on reducing the number of full days of hospitalization, but also on reducing the hours patients spent in the hospital on the last day of their stay. Getting patients discharged even four hours earlier in the day could help prevent a hospital-acquired complication and balance out operational costs for the time period. Instead of tying up staffing resources over a four- or five-hour block of time to process discharges and prepare hospital rooms for new patients in the afternoon, the hospitals have spread out the workload and shifted increasing proportions of discharges to the morning. The hospitals have increased the number of hospital discharges before 11:00 a.m. from 5 percent to 25 percent without needing to increase staffing levels.

The increased presence of case managers on hospital units at a multihospital system has created other efficiencies and cost savings. The case managers have reduced the number of handoffs and missed cases, the extra work needed to ensure payment, and the lack of patient care coordination at the unit level. These changes have resulted in $671,000 in savings and a steadily declining LOS.


Since October 2010, the Medicare and Medicaid Recovery Audit Contractor (RAC) program has expanded the number and the scope of the payment issues it can investigate. RAC auditors now oversee at least 150 issues involving fee-for-service claims related to DRG validation, coding, documentation, and medical necessity.

RAC audits not only are administratively costly, but also may require the hospital to provide as many as 300 records over a 45-day period. The audits also can determine that certain Medicare payments were made improperly and require a hospital to repay them.

A robust case management initiative reduces the business risk from RAC audits. It can ensure that Medicare and Medicaid patients are carefully monitored throughout their hospital stay and document that the level of care is appropriate for each patient, that there are no avoidable days of care, and that patterns of problems are identified and corrected. Case managers in particular can check for clearly documented admission orders, proper patient registration, accurate Centers for Medicare & Medicaid Services coding, and sources of avoidable days, including the lack of availability of post-hospital care, inpatient admissions that are not supported by clinical symptoms, and delays in obtaining clinical tests.

After participating in RAC compliance meetings, the director of case management at a three-hospital health system educated physicians about regulatory issues and their financial impact on the organization and created a case management on-call system to handle direct admissions and off-hours issues. These actions reduced a $2 million loss in payment to $500,000.

Preparing for the Future

Case management will be crucial for facilities like Providence Hospitals that will not be creating formal accountable care organizations but will be contracting for community-based components of care to provide services at the highest quality and lowest cost across the continuum. Case managers will serve as the links for coordinating healthcare delivery between the hospitals and external providers. Case managers will also work with patients and families to make sure the healthcare delivery pieces are in place so the patient can get out of the hospital and into the home or some other less-acute setting in a more timely fashion.

As the bridge between the financial and the clinical aspects of healthcare delivery, case management will play a key role in involving physicians in the most efficient and effective use of resources as well as adherence to quality-based and bundled payment structures. Data from case management activities can form the foundation for the structural and operational changes that will define financial success for healthcare organizations going forward.

Author affiliation:

Barbara (Bobbi) Baguhn, MA, BSN, RN, CLNC, CMAC, consulting interim, case management, B. E. Smith, Lenexa, Kan. (

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